I Wonder…

BEIJING — When China announced better-than-expected trade numbers last month, the statistics were met with outright suspicion from international powerhouses such as Goldman Sachs, Swiss financial firm UBS and Australian bank ANZ. The disbelieving scoffing only mounted days later, when the government unveiled numbers showing yet another positive trend — a narrowing income gap between China’s rich and poor.

Numbers in China have long faced suspicion, from optimistic recordings of visibly hazy air to the age of its Olympic gymnasts. But the credibility of its economic data is now coming under particular scrutiny, at a time when China’s growing global role weighs on investors, analysts and governments worldwide, even as the country’s economy is slowing after years of unbridled growth.

It isn’t merely foreign economists who are skeptical:

Even the man taking over China’s economy — incoming Chinese premier Li Keqiang – supposedly disparaged his government’s Gross Domestic Product figures, calling them “man-made,” according to a leaked U.S. diplomatic cable from 2007, and saying he too relies on rail-cargo, bank-loan and power-consumption data.

When you start relyng on power-consumption data, they’ll start to cook that.

It seems to me that there’s quite a bit of distance between “trying to do your best” and “trying to preserve your life and livelihood”. My guess is that if that were made into a numeric scale from to 10 the NBS is probably around an 8. Whatever the case I strongly suspect that a lot of the problem can be boiled down to incentives. Local officials have incentives to report better results than are actually the case (which is why the local reports never sum up to the national totals). National officials have incentives to report a brighter picture to their bosses than is actually the case (just like here).

When I say that China’s internal contradictions will create a barrier to its development, this is exactly the sort of thing that I mean.